Embed Size (px)
Citation preview
LETTER OF TRANSMITTAL
TO Mr. Keshav Singh
This is to the reference of project “Auto mobile two wheeler” assigned by you on date 19/08/08 to the group “F” section –B (PGDM). This project basically deals in two wheeler sector “Hero Honda” and the factors affecting its business environment like current happenings in the industry, government policies, and competitor’s analysis. Basis of the analysis is Porter’s five force model. Source of the content for this project is internet. This project also gives some light on other two wheeler sectors in India. Due date for the completion and submission of this project is 22/09/08.
Sincerely yours
MANISH KUMAR SAHOO
1
PROJECT ONPROJECT ON
TWO WHEELER COMPANYTWO WHEELER COMPANYHERO HONDAHERO HONDA
SUBMITTED TOSUBMITTED TO
MR. KESHAV SINGHMR. KESHAV SINGH
SUBMITTED BY:SUBMITTED BY:
MANISH KUMARMANISH KUMAR SAHOO SAHOO
[email protected]@ymail.com
2
ABSTRACTABSTRACT
Automobile is one of the largest industries in global market. Being the leader in product and process technologies in the manufacturing sector, it has been recognized as one of the drivers of economic growth. During the last decade, well directed efforts have been made to provide a new look to the automobile policy for realizing the sector's full potential for the economy. Steps like abolition of licensing, removal of quantitative restrictions and initiatives to bring the policy framework in consonance with WTO requirements have set the industry in a progressive track. Removal of the restrictive environment has helped restructuring, and enabled industry to absorb new technologies, aligning itself with the global development and also to realize its potential in the country.
The two-wheeler industry has been in existence in ourThe two-wheeler industry has been in existence in our country since 1955. Two-wheeler segment is one of the mostcountry since 1955. Two-wheeler segment is one of the most important components of the automobile sector that hasimportant components of the automobile sector that has undergone significant changes due to shift in policyundergone significant changes due to shift in policy environment in India. The composition of the two-wheelerenvironment in India. The composition of the two-wheeler industry has witnessed sea changes in the post-reformindustry has witnessed sea changes in the post-reform period. It consists of three segments viz. scooters,period. It consists of three segments viz. scooters, motorcycles and mopeds. India is the second largestmotorcycles and mopeds. India is the second largest producer and manufacturer of two-wheelers in the world.producer and manufacturer of two-wheelers in the world. Indian two-wheeler industry has got spectacular growth inIndian two-wheeler industry has got spectacular growth in the last few years.the last few years.
Hero Honda, the ‘World No.1’ two wheeler manufacturer for past 5 years in row is a joint venture between India's Hero Group and Honda Motor Company, Japan has not only created the world's single largest two wheeler company but also one of the most successful joint ventures worldwide.
3
brief contentsbrief contents
executive summeryexecutive summery
about the sectorabout the sector EVOLUTION OF TWO-WHEELER INDUSTRY IN
INDIA A GROWTH PERSPECTIVE
major players in the sectormajor players in the sector HERO HONDA MOTORS LTD: BAJAJ AUTO LTD TVS MOTORS: YAMAHA MOTOR PVT. LTD TYPES OF TWO-WHEELERS IN INDIA:
HERO HONDAHERO HONDA HERO HONDA'S MISSIONHERO HONDA'S MISSION HERO HONDA'S MANDATE HERO HONDA'S MANDATE CORPORATE SOCIAL RESPONSIBILITY (CSR)CORPORATE SOCIAL RESPONSIBILITY (CSR)
PORTER’S FIVE FORCE MODEL
THREAT OF NEW COMPETITORS
RIVALRY AMONG EXISTING FIRMS IN INDUSTRY
THREAT OF SUBSTITUTE GOODS/SERVICES
SUPPLIERS BARGENING POWER
4
BARGAINING POWER OF CUSTOMERS:
Recent happening on two-wheeler sector
Recent happening on hero Honda
KEY FACTORS INFLUENCING DEMAND OF TWO-WHEELER
KEY FACTORS AFFECTING THE SALES OF MOTORCYCLES:
CONCLUSION
BibliographyBibliography
5
EXECUTIVE SUMMERYEXECUTIVE SUMMERYIndia is the second largest producer and manufacturer of two-wheelers in the world. Indian two-wheeler industry has got spectacular growth in the last few years. Indian two-wheeler industry had a small beginning in the early 50's. The Automobile Products of India (API) started manufacturing scooters in the country.
Bikes are a major segment of Indian two wheeler industry, the other two being scooters and mopeds. Indian companies are among the largest two-wheeler manufacturers in the world. Hero Honda and Bajaj Auto are two of the Indian companies that top the list of world companies manufacturing two-wheelers.
The two-wheeler market was opened to foreign companies in the mid 1980s. The openness of Indian market to foreign companies lead to the arrival of new models of two-wheelers into India. Easy availability of loans from the banks, relatively low rate of interest and the discount of prices offered by the dealers and manufacturers lead to the increasing demand for two-wheeler vehicles in India. This lead to the strong growth of Indian automobile industry.
The two-wheeler industry in India has grown rapidly in the country since the announcement of the process of liberalization in 1991 by the then finance minister Dr. Manmohan Singh, now Prime Minister of India. Previously, there were only a handful of two-wheeler models available in the country. Currently, India is the second largest producer of two-wheelers in the
6
world. It stands next only to China and Japan in terms of the number of two-
wheelers produced and the sales of two-wheelers respectively. In the year 2005-2006, the annual production of two-wheelers in India stood at around 7600801 units. The trend of owning two-wheelers is due to a variety of facts peculiar to India. One of the chief factors is poor public transport in many parts of India. Additionally, two-wheelers offer a great deal of convenience and mobility for the Indian family.
Hero Honda Motors Limited, based in Delhi, India, is the world's largest manufacturer of motorcycles. Hero Honda is a joint venture that began in 1984 between the Hero Group of India and Honda of Japan. It has been the world's biggest manufacturer of 2-wheeled motorized vehicles since 2001, when it produced 1.3 million motorbikes in a single year.
Hero Honda's Splendor is the world's largest selling motorcycle. Its 2 plants are in Dharuhera and Gurgaon, both in India. Third plant at Haridwar, Uttaranchal has also started production by April, 2008. It will have production facilities such as Lean Manufacturing concept, more flexible lines & stream line material flow, within & proximity (planning to set vendors in nearby locations constituting HHML Park). It specializes in dual use motorcycles that are low powered but very fuel efficient.
7
ABOUT THE SECTORABOUT THE SECTOR
Automobile is one of the largest industries in global market. Being the leader in product and process technologies in the manufacturing sector, it has been recognized as one of the drivers of economic growth. During the last decade, well-directed efforts have been made to provide a new look to the automobile policy for realizing the sector's full potential for the economy. Steps like abolition of licensing, removal of quantitative restrictions and initiatives to bring the policy framework in consonance with WTO requirements have set the industry in a progressive track. Removal of the restrictive environment has helped restructuring, and enabled industry to absorb new technologies, aligning itself with the global development and also to realize its potential in the country. The liberalization policies have led to continuous increase in competition which has ultimately resulted in modernization in line with the global standards as well as in substantial cut in prices. Aggressive marketing by the auto finance companies have also played a significant role in boosting automobile demand, especially from the population in the middle income group.
EVOLUTION OF TWO-WHEELER INDUSTRY IN INDIA
8
Two-wheeler segment is one of the most important components of the automobile sector that has undergone significant changes due to shift in policy environment. The two-wheeler industry has been in existence in the country since 1955. It consists of three segments viz. scooters, motorcycles and mopeds. According to the figures published by SIAM, the share of two-wheelers in automobile sector in terms of units sold was about 80 per cent during 2003-¬04. This high figure itself is suggestive of the importance of the sector. In the initial years, entry of firms, capacity expansion, choice of products including capacity mix and technology, all critical areas of
functioning of an industry, were effectively controlled by the State machinery. The lapses in the system had invited fresh policy options that came into being in late sixties. Amongst these policies, Monopolies and Restrictive Trade Practices (MRTP) and Foreign Exchange Regulation Act (FERA) were aimed at regulating monopoly and foreign investment respectively. This controlling mechanism over the industry resulted in: (a) several firms operating below minimum scale of efficiency; (b) under-utilization of capacity; and (c) usage of outdated technology. Recognition of the damaging effects of licensing and fettering policies led to initiation of reforms, which ultimately took a more prominent
9
shape with the introduction of the New Economic Policy (NEP) in 1985.
However, the major set of reforms was launched in the year 1991 in response to the major macroeconomic crisis faced by the economy. The industrial policies shifted from a regime of regulation and tight control to a more liberalized and competitive era. Two major results of policy changes during these years in two-wheeler industry were that the, weaker players died out giving way to the new entrants and superior products and a sizeable increase in number of brands entered the market that compelled the firms to compete on the basis of product attributes. Finally, the two-¬wheeler industry in the country has been able to witness a proliferation of brands with introduction of new technology as well as increase in number of players. However, with various policy measures undertaken in order to increase the competition, though the degree of concentration has been lessened over time, deregulation of the industry has not really resulted in higher level of competition.
A GROWTH PERSPECTIVE
The composition of the two-wheeler industry has witnessed sea changes in the post-reform period. In 1991, the share of scooters was about 50 per cent of the total 2-wheeler demand in the Indian market.
10
Motorcycle and moped had been experiencing almost equal level of shares in the total number of two-wheelers. In 2003-04, the share of motorcycles increased to 78 per cent of the total two-wheelers while the shares of scooters and mopeds declined to the level of 16 and 6 per cent respectively. A clear picture of the motorcycle segment's gaining importance during this period is exhibited by the Figures 1, 2 and 3 depicting total sales, share and annual growth during the period 1993-94 through 2003-04. National Council of Applied Economic Research (NCAER) had forecast two-wheeler demand during the period 2002¬-03 through 2011-12. The forecasts had been made using econometric technique along with inputs obtained from a primary survey conducted at 14 prime cities in the country. Estimations were based on Panel Regression, which takes into account both time series and cross section variation in data. A panel data of 16 major states over a period of 5 years ending 1999 was used for the estimation of parameters. The models considered a large number of macro-economic, demographic and socio-economic variables to arrive at the best estimations for different two-wheeler segments. The projections have been made at all India and regional levels. Different scenarios have been presented based on different assumptions regarding the demand drivers of the two-wheeler industry. The most likely scenario assumed annual growth rate of Gross Domestic Product (GDP) to be 5.5 per cent during 2002¬-03 and was anticipated to increase gradually to 6.5 per cent during 2011¬-12. The all-
11
India and region-wise projected growth trends for the motorcycles and scooters are presented in Table 1. The demand for mopeds is not presented in this analysis due to its already shrinking status compared to' motorcycles and scooters.
It is important to remember that the above-mentioned forecast presents a long-term growth for a period of 10 years. The high growth rate in motorcycle segment at present will stabilize after a certain point beyond which a condition of equilibrium will set the growth path. Another important thing to keep in mind while interpreting these growth rates is that the forecast could consider the trend till 1999 and the model could not capture the recent developments that have taken place in last few years. However, this will not alter the regional distribution to a significant extent.
India is the second largest producer and manufacturer of two-wheelers in the world. Indian two-wheeler industry has got spectacular growth in the last few years. Indian two-wheeler industry had a small beginning in the early 50's. The Automobile Products of India (API) started manufacturing scooters in the country.
Bikes are a major segment of Indian two wheeler industry, the other two being scooters and mopeds. Indian companies are among the largest two-wheeler manufacturers in the world. Hero Honda and Bajaj Auto are two of the Indian companies that top the list
12
of world companies manufacturing two-wheelers.
The two-wheeler market was opened to foreign companies in the mid 1980s. The openness of Indian market to foreign companies lead to the arrival of new models of two-wheelers into India. Easy availability of loans from the banks, relatively low rate of interest and the discount of prices offered by the dealers and manufacturers lead to the increasing demand for two-wheeler vehicles in India. This lead to the strong growth of Indian automobile industry.
MAJOR PLAYERS IN THE SECTOR
After facing its worst recession during the early 1990s, the two-wheeler industry bounced back with a 25% increase in volume sales in February 1995. The scooters are considered as family vehicles. There are many two-wheeler manufacturers in India. Major players in the 2-wheeler industry are
O HERO HONDA MOTORS LTD (HHML)O BAJAJ AUTO LTD (BAJAJ AUTO) O TVS MOTOR COMPANY LTD (TVS)O YAMAHA MOTOR PVT. LTD
HERO HONDA MOTORS LTD:
13
HERO HONDA MOTORS LIMITED, BASED IN DELHI, INDIA, IS THE WORLD'S LARGEST MANUFACTURER OF MOTORCYCLES1. HERO HONDA IS A JOINT VENTURE THAT BEGAN IN 1984 BETWEEN THE HERO GROUP OF INDIA AND HONDA OF JAPAN. IT HAS BEEN THE WORLD'S BIGGEST MANUFACTURER OF 2-WHEELED MOTORIZED VEHICLES SINCE 2001, WHEN IT PRODUCED 1.3 MILLION MOTORBIKES IN A SINGLE YEAR. MORE DETAILS OF HEROHONDA WILL BE DISCUSSED IN THIS PROJECT.
BAJAJ AUTO LTD:
BAJAJ AUTO IS A MAJOR INDIAN AUTOMOBILE MANUFACTURER. IT IS INDIA'S LARGEST AND THE WORLD'S 4TH LARGEST TWO- AND THREE-WHEELER MAKER[CITATION NEEDED]. IT IS BASED IN PUNE, MAHARASHTRA, WITH PLANTS IN AKURDI AND CHAKAN (NEAR PUNE),WALUJ (NEAR AURANGABAD) AND
PANTNAGAR IN UTTARANCHAL. BAJAJ AUTO MAKES AND EXPORTS MOTORSCOOTERS, MOTORCYCLES AND THE AUTO RICKSHAW.
THE FORBES GLOBAL 2000 LIST FOR THE YEAR 2005 RANKED BAJAJ AUTO AT 1946 [1].
OVER THE LAST DECADE, THE COMPANY HAS SUCCESSFULLY CHANGED ITS IMAGE FROM A SCOOTER MANUFACTURER TO A TWO WHEELER MANUFACTURER. ITS PRODUCT RANGE ENCOMPASSES SCOOTERETTES, SCOOTERS AND MOTORCYCLES. ITS REAL GROWTH IN NUMBERS HAS
14
COME IN THE LAST FOUR YEARS AFTER SUCCESSFUL INTRODUCTION OF A FEW MODELS IN THE MOTORCYCLE SEGMENT.
THE COMPANY IS HEADED BY RAHUL BAJAJ WHO IS WORTH MORE THAN US$1.5 BILLION
BAJAJ AUTO CAME INTO EXISTENCE ON NOVEMBER 29, 1945 AS M/S BACHRAJ TRADING CORPORATION PRIVATE LIMITED. IT STARTED OFF BY SELLING IMPORTED TWO- AND THREE-WHEELERS IN INDIA. IN 1959, IT OBTAINED LICENSE FROM THE GOVERNMENT OF INDIA TO MANUFACTURE TWO- AND THREE-WHEELERS AND IT WENT PUBLIC IN 1960. IN 1970, IT ROLLED OUT ITS 100,000TH VEHICLE. IN 1977, IT MANAGED TO PRODUCE AND SELL 100,000 VEHICLES IN A SINGLE FINANCIAL YEAR. IN 1985, IT STARTED PRODUCING AT WALUJ IN AURANGABAD. IN 1986, IT MANAGED TO PRODUCE AND SELL 500,000 VEHICLES IN A SINGLE FINANCIAL YEAR. IN 1995, IT ROLLED OUT ITS TEN MILLIONTH VEHICLE AND PRODUCED AND SOLD 1 MILLION VEHICLES IN A YEAR.
TVS MOTORS:
In 1980 TVS 50, India's first two-seater moped rolled out of the factory at Hosur in Tamil Nadu, Southern India. A byword for reliability, the TVS 50 had proved itself promising and successful in
every test and paved a way for many successes for TVS Suzuki. Likewise the TVS champ and super
15
Champ gave a reliable and sturdy two wheeler to public, who wanted looks fused with economy. These two wheelers together redefined the category of mopeds in India. TVS later left its collaboration with Suzuki and started to manufacture its own vehicles.
TVS Motors Company is currently the third largest two wheeler company in India with sales of 107,117 units (as of June 2007). The company exported 9,133 units of two wheelers in June 2007.
YAMAHA MOTOR PVT. LTD
Yamaha made its initial foray into India in 1985. Subsequently, it entered into a 50:50 joint venture with the Escorts Group in 1996. However, in August 2001, Yamaha acquired its remaining stake as well, bringing the Indian operations under its complete control as a 100% subsidiary of Yamaha Motor Co., Ltd, Japan.
India Yamaha Motor operates from its state-of-the-art-manufacturing units at Faridabad in Haryana and Surajpur in Uttar Pradesh and produces motorcycles both for domestic and export markets. With a strong workforce of 2000 employees, India Yamaha Motor is highly customer-driven and has a countrywide network of over 400 dealers.
The company pioneered the volume bike segment with the launch of its 100 cc 2-stroke motorcycle RX 100. Since then, it has introduced an entire range of 2-stroke and 4-stroke bikes in India. Presently, its
16
product portfolio includes Crux (100cc), Alba (106cc) and Gladiator (125cc).
The other key players in the two-wheeler industry are KINETIC MOTOR COMPANY LTD (KMCL), KINETIC ENGINEERING LTD (KEL), LML LTD (LML), MAJESTIC AUTO LTD (MAJESTIC AUTO), ROYAL ENFIELD LTD (REL) AND HONDA MOTORCYCLE & SCOOTER INDIA (P) LTD (HMSI).
TYPES OF TWO-WHEELERS IN INDIA:
There are mainly three types of two-wheelers available in India. They are
o Scooters o Scooterettes/Mopeds.o MOTORCYCLES
SCOOTERS IN INDIA :
The scooter and the scooterette share in the Indian two wheeler market is 13.4%. The main models available in India are Bajaj Chetak, Honda Eterno, Kinetic Blaze, LML NV SPL and LML Select II.
SCOOTERETTES/MOPEDS :
TVS Motors launched India's first 50cc, 2 seater
17
moped: TVS Moped 50. TVS also launched India's first indigenous scooterette: Scooty in 1994. This segment has about one-fourth share in the Indian two wheeler industry. The major models available in India are Bajaj Wave, Bajaj Kristal DTSi, Bajaj Blade DTSi, Hero Honda Pleasure, Kinetic Kine, Kinetic 4S, Kinetic Nova, Kinetic Zoom, Kinetic V2 Range, Kinetic King 100, Kinetic Luna Super, Kinetic Luna TFR, Yo Smart, Honda Dio, Honda Activa, TVS Scooty and TVS XL.
MOTORCYCLES IN INDIA:
Bikes comprise a major segment of Indian two wheeler industry.
Company : Bajaj Auto Ltd
Company : HERO HONDA
* Bajaj Avenger* Bajaj CT 100* Bajaj Platina* Bajaj Discover DTSi* Bajaj Pulsar DTSi* Bajaj Wave* Bajaj Wind 125* Sonic DTSi
* Hero Honda Achiever* Hero Honda CD Dawn* Hero Honda CD Deluxe* Hero Honda Glamour* Hero Honda Glamour-Fi* Hero Honda Karizma* Hero Honda Passion Plus* Hero Honda Pleasure* Hero Honda Super Splendor* Hero Honda Splendor NXG* Hero Honda CBZ X-Treme
Company : Kinetic Motor
Company : TVS MOTOR
Company : Yamaha Motor
18
Company India * Kinetic Aquila* Kinetic Boss* Kinetic Challenger* Kinetic Comet* Kinetic GF* Kinetic Stryker* Kinetic Velocity
* TVS Apache* TVS Centra* TVS Fiero* TVS Star* TVS Victor
* Yamaha CruxS* Yamaha G5* Yamaha Gladiator
Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj Auto) and TVS Motor Company Ltd (TVS) - accounting for over 80% of the industry sales as in 9MFY2005.
HERO HONDAHERO HONDA
Hero Honda Motors Limited, based in Delhi, India, is the world's largest manufacturer of motorcycles. Hero Honda is a joint venture that began in 1984 between the Hero Group of India and Honda of Japan. It has been the world's biggest manufacturer of 2-wheeled motorized vehicles since 2001, when it produced 1.3 million motorbikes in a single year.
During the 80s, Hero Honda became the first company in India to prove that it was possible to drive a vehicle without polluting the roads. The company introduced new generation motorcycles that set industry benchmarks for fuel thrift and low emission. A legendary 'Fill it - Shut it - Forget it' campaign captured the imagination of commuters across India, and Hero Honda sold millions of bikes purely on the commitment of increased mileage.
19
Over 20 million Hero Honda two wheelers tread Indian roads today. These are almost as many as the number of people in Finland, Ireland and Sweden put together!
Hero Honda has consistently grown at double digits since inception; and today, every second motorcycle sold in the country is a Hero Honda. Every 30 seconds, someone in India buys Hero Honda's top -selling motorcycle – Splendor. This festive season, the company sold half a million two wheelers in a single month—a feat unparalleled in global automotive history.
Hero Honda bikes currently roll out from its three globally benchmarked manufacturing facilities. Two of these are based at Dharuhera and Gurgaon in Haryana and the third state of the art manufacturing facility was inaugurated at Haridwar, Uttrakhand in April this year. These plants together are capable of producing out 4.4 million units per year.
Hero Honda's extensive sales and service network now spans over 3000 customer touch points. These comprise a mix of dealerships, service and spare points, spare parts stockiest and authorized representatives of dealers located across different geographies.
Hero Honda values its relationship with customers. Its unique CRM initiative - Hero Honda Passport Program, one of the largest programs of this kind in the world, has over 3 million members on its roster.
20
The program has not only helped Hero Honda understand its customers and deliver value at different price points, but has also created a loyal community of brand ambassadors.
Having reached an unassailable pole position in the Indian two wheeler market, Hero Honda is constantly working towards consolidating its position in the market place. The company believes that changing demographic profile of India, increasing urbanization and the empowerment of rural India will add millions of new families to the economic mainstream. This would provide the growth ballast that would sustain Hero Honda in the years to come. As Brijmohan Lall Munjal, the Chairman, Hero Honda Motors succinctly points out, "We pioneered India's motorcycle industry, and it's our responsibility now to take the industry to the next level. We'll do all it takes to reach there.''
HERO HONDA'S MISSION
Hero Honda’s mission is to strive for synergy between
technology, systems and human resources, to
produce products and services that meet the quality,
performance and price aspirations of its customers.
At the same time maintain the highest standards of
ethics and social responsibilities.
.
HERO HONDA'S MANDATE
21
Hero Honda is a world leader because of its excellent
manpower, proven management, extensive dealer
network, efficient supply chain and world-class
products with cutting edge technology from Honda
Motor Company, Japan. The teamwork and
commitment are manifested in the highest level of
customer satisfaction, and this goes a long way
towards reinforcing its leadership status.
Hero Honda Motors Ltd.
Type Public company BSE: HEROHONDA MOTORS
Founded January 19, 1984 in Gurgaon, Haryana, India
Headquarters
New Delhi, India
Key people
Brijmohan Lal Munjal, Founder
Mr. Brijmohan Lal Munjal, ChairmanMr. Toshiaki Nakagawa, Joint Managing Director
Mr. Pawan Munjal, Managing Director, CEO
Industry AutomotiveProducts Motorcycles, ScootersRevenue U$ 2.8 billion
Website
www.Herohonda.com
CORPORATE SOCIAL RESPONSIBILITY (CSR)
22
Hero Honda Motors takes considerable pride in its
stakeholder relationships, especially ones developed
at the grassroots. The Company believes it has
managed to bring an economically and socially
backward region in Dharuhera, Haryana, into the
national economic mainstream.
An Integrated Rural Development Centre has been
set up on 40 acres of land along the Delhi-Jaipur
Highway. The Centre-complete with wide approach
roads, clean water, and education facilities for both
adults and children-now nurtures a vibrant, educated
and healthy community.
The Foundation has adopted various villages located within vicinity of the Hero Honda factory at Dharuhera for integrated rural development. This includes:
Installation of deep bore hand pumps to provide
clean drinking water.
Constructing metalled roads and connecting
these villages to the National Highway (NH -8).
Renovating primary school buildings and
providing hygienic water and toilet facilities.
23
Ensuring a proper drainage system at each of
these villages to prevent water-
logging.
PORTER’S FIVE FORCE MODEL
THREAT OF NEW COMPETITORS-
M&M BUYS KINETIC, ENTERS 2-WHEELER BIZ:
Competitive Forces in the Task EnvironmentCompetitive Forces in the Task Environment
SuppliersBargaining
Power
ThreatOf new
Competitors
BuyersBargaining
Power
Threat ofSubstitute
Goods/services
Rivalry among Existing firms In industry
24
Mahindra & Mahindra (M&M), India’s largest tractor and utility vehicle maker is buying the business assets of loss-making scooter maker Kinetic Motor Company for Rs 110 crore to gain an entry into the two-wheeler market.M&M will buy the stake through a new joint venture in which it will hold 80 per cent and Kinetic the rest.
“There is strong evidence that two-wheelers are going to enjoy a renaissance,” said Anand Mahindra, vice-chairman and managing director, Mahindra Group on Tuesday.
Mahindra said the group found it natural to “look at all aspects of the transportation business.” To this end, the group also plans to make heavy commercial vehicles.
He added that the group plans to build its two-wheeler business on the back of its global sourcing expertise, experience in building differentiated brands and utilising the strength of Mahindra Finance.
Kinetic Motor Co, which used to have a tie-up with Honda, revolutionised the scooter market two decades ago by introducing the gearless scooter. The company today has motorcycle and scooter products, its well known brands being Kinetic 4s, Kinetic Blaze, Kinetic Nova and Kinetic Flyte.
Kinetic Motor Company also has an option to sell its 20 per cent stake in the new joint venture after
25
seven years.
“The alignment with M&M will help Kinetic compete with the big players in the two-wheeler business,” said Ashim Bhuvania, vice-president (corporate finance) at Ambit, the investment bank that advised Kinetic Motor on the deal.
THE NANO EFFECT:
Nano is expected to be launched around Diwali and may lead to a 20 per cent reduction in prices of two-wheelers and a 35 per cent decline in prices of second-hand cars, according to industry chamber Assocham.
"Nano is expected to change the automobile market in India. It would cater to a typical middle income Indian family of four who wants to avoid rain, wind and dust. Its freedom for four," says Dilip Chenoy of the Society of India Automobile Manufacturers (SIAM).
The 100-125 cc two-wheeler range, which comprises 90% of the two-wheeler market in terms of sales, could be severely affected with the launch of Nano. Bike makers Hero Honda and Bajaj have realised this and have jumped into the bandwagon of ultra small cars.
Rajesh an IT professional working with an MNC in Gurgaon who, travels every day in a Bajaj Pulsar says, "I would definitely consider buying the Nano as
26
the cost of the car fits my pocket and above all it gives good mileage."
Industry research organization CRISIL, in a report, stated that the Nano may bring 65 per cent more families into the range of those who can now afford a car. "The on-road price for a Nano is expected to be in the region of Rs 1.3 lakh. This brings down the cost of ownership of an entry level car in India by 30 per cent, making a new car affordable to families with income level of Rs 2 lakh," the Crisil research added.
HIGHER-END BIKES TO ENTER:
Towards the end of this year, in India for higher-end bikes and few manufacturers are in the process of unveiling such expensive bikes. Companies like Yamaha, Suzuki, Kawasaki, Triumph, Harley Davidson, KTM, Ducati and MV Augusta have launched (or are planning to unveil) high-powered bikes in India. Consumer response, however, has been tepid.
NEW COMPETITOR FOR HERO HONDA:
Honda Motor Co., the world's biggest maker of motorcycles and scooters, plans to start selling a new motorcycle and a new scooter in India next year as demand grows in the world's second-largest two-wheeler market.
27
Honda plans to spend $76 million (2.4 billion Baht) in the next three years on four to five new models and increasing annual manufacturing capacity from 1 million vehicles to 1.2 million by 2010, said Shinji Aoyama, president and chief executive officer of local unit Honda Motorcycle & Scooter India Pvt.
Honda's plans to sell new models increases competition for its affiliate Hero Honda Motors Ltd., India's biggest motorcycle maker, at a time sales of motorcycles is slowing. Motorcycle sales have fallen in India this year as five-year-high interest rates deter buyers in a market where three-fifths of all motorcycles and scooters are bought on credit. The move could see Hero Honda Motors Ltd., India receive new technology from its Japanese parent to manufacture powerful bikes targeted at urban youth, while Hero Honda would stick to the high-volume, but low-margin, bikes in the 100-125cc segment.
RIVALRY AMONG EXISTING FIRMS IN INDUSTRY:
The main rivalry that HERO HONDA is facing is from Bajaj Auto Ltd (Bajaj Auto) , TVS Motor Company Ltd (TVS) Yamaha Motors India Ltd (Yamaha), Majestic Auto Ltd (Majestic Auto), Royal Enfield Ltd (REL) and Honda Motorcycle & Scooter India (P) Ltd (HMSI).
Bajaj, which at one time was closing in on Hero Honda, has seen its grip on the bike market going down by close to 6% in just 15 months. Its share slipped to 28.7% at the end of 2007-08 and
28
further down to 26% at the end of the first quarter (April-June) of 2008-09, from 31.7% in 2006-07.
In the economy segment Bajaj is the leader with 46% of the market share with boxer being the largest selling bike in this segment. In the executive segment Hero Honda is the clear leader with 67% market share with splendor and passion leading the market in this segment and will continue to do so in the near future well now we come to the most controversial segment which is the premium segment since the current market leader according to the sales of the past few months is CBZ but then pulsar has arrived and the consumer choice clearly shows that this place will be reserved for pulsar for some time as a counter attack hero Honda too would be launching a bike in this segment but it is too early to comment on that.
THREAT OF SUBSTITUTE GOODS/SERVICES:
The pulsar has taken the market by storm in the premium segment it has clearly displaced the CBZ and the other models of this segment and looks like the things will remain this way for some time but there are tough times ahead since Hero Honda plans to launch a new bike in this segment by the end of this year which means that there is a lot to look ahead from a consumers point of view.
Bajaj auto ltd is the second biggest manufacturer of motorcycles. The companies
29
recent indigenous launch in 4-stroke segment viz; the 150 / 180 cc pulsar which has practically snatched the market share of the bikes like Hero Honda CBZ, Suzuki Fiero, Lml adreno etc, and it appears that pulsar would rule this segment till the time there are some new launches in this segment by other manufacturers, for bajaj pulsar has been the major contributor for the rise in its
motorcycle sales along with its other popular models such as boxer, caliber croma etc.
With the second-hand car market developing, a preference for used cars to new two-wheelers among vehicle buyers cannot be ruled out.
"Nano is expected to change the automobile market in India. It would cater to a typical middle income Indian family of four who wants to avoid rain, wind and dust. Its freedom for four. The 100-125 cc two-wheeler range, which comprises 90% of the two-wheeler market in terms of sales, could be severely affected with the launch of Nano. Bike makers Hero Honda and Bajaj have realised this and have jumped into the bandwagon of ultra small cars.
The face of auto industry, that was redefined with the invention of fuel-efficient four-stroke engine technology, is all set to see dawn of a new era in two-wheeler industry. It's not petrol or diesel or any other fuel, but it's electricity
30
that have initiated a revolution in two-wheeler industry in India. This will definitely give all the major players a run for their money.
SUPPLIERS BARGENING POWER:
Two-wheeler manufacturer Hero Honda are into discussions with Energtek, a provider of absorbed natural gas products, for technology that would enable two-wheelers to run on gas instead of petrol Energtek, which offers absorbed natural gas (ANG) technology, has initiated discussions to supply the new technology and claims that ANG will reduce fuel cost by more than 50%. here as the supplier is lone player in the market so there will be some what monopoly in the market.
But usually it is Low, due to stiff competition In the market.
BARGAINING POWER OF CUSTOMERS:
31
Very high, due to availability of options.
For example in 4-stroke segment viz; the 150 / 180 cc pulsar compete with bikes like Hero Honda CBZ, Suzuki Fiero, Lml adreno .
Recent happening on two-wheeler sector
IMPACT OF HIGH OIL PRICE:
New Delhi, two-wheelers hit upraised prices between assorted models of the arrange of R 800-2000. They cited the escalation of prices of nakedness materials cod to higher prices.
Hero Honda declared weekday a toll process of up to Rs 850 on its models. Bajaj Auto accumulated prices on its 100 cc cycle Platina and another models much as XCD and Pulsar, with gist from the terminal hebdomad of July.
32
Mr. Amit Nandi, evilness chair of Sales and Marketing, Bajaj Auto, said: We upraised prices on non-metallic var. of Platina by R 500. A kindred process was locate in place, modify on 125 cc cycle XCD. In housing of Pulsar, 150 and 180 cc, the toll process was accumulated Rs 1500.
TVS Motor Company has also upraised prices of models early this month.
We hit already accumulated prices to Rs 1800 on the assorted models, “said HS Goindi, the nous of the company’s marketing and sales.
This would be the ordinal ammo of toll increases during the assemblage after the prototypal was conducted during April-May
E-BIKES: ON THE RIGHT TRACK! Undoubtedly, it's economy, convenience and zero emission that are the prime drivers for the electric two-wheeler category in major parts of the world. Today, with the prices of fuel spiralling to scary heights, there's unwieldy pressure on corporate as well as business groups to ease the stress on the environment that's already buckling under the pressure. E-Bikes, as a natural consequence, are
33
here not just to provide a solution...they're here for keeps!
"In comparison to (ICE) Internal Combustion Engine-based two wheelers running on petrol, electric two-wheelers run on electricity, leading to huge savings. With running cost as low as 10 per cent of conventional petrol driven two-wheelers, consumers stands to gain undoubtedly,"
One litre of petrol gives you 50 km of transportation. One unit of power gives you 70 km to 100 km of transportation. One litre of petrol cost approximately Rs 50. And one unit of power in India cost approximately Rs 4 to Rs 5. This makes it less than 10 paise per km in an electric two-wheeler compared to almost 1 rupee per km in a petrol two-wheeler. If you extrapolate this over a month, it leads to a saving of almost Rs 1,350 per month in a situation where a person rides his bike for 50 km every day. And in 24 months, the savings made enable the user to recover the cost of the vehicle! The consumer virtually is assured of a clean form of mobility, that too free, when he is opting for an electric two-wheeler.
Hero Electric's managing director Naveen Munjal feels that there are four basic compelling reasons for e-bikes to stay - viz. the depleting stocks of non renewable crude oil; the ever-increasing prices of petrol; their utility as a viable non-polluting economical means of transport, and lastly, their comfort by way of lower sound emissions,
34
convenience of doing away with petrol pump visits, and lack of maintenance costs.
As Chairman and CTO, Electrotherm, Mukesh Bhandari puts it "The Electric 2 Wheelers category will grow exponentially over the next few years with large national level players investing substantial amount of money in manufacturing facility, technology, indigenization, product development, brand and quality improvement thereby making available electric vehicles suitable for Indian Roads".
Avinash Bhandari, Director Operation of Electrotherm adds, "The launch of high speed / high powered electric two wheelers have brought electric vehicles in the main stream scooter category. With the availability of such high powered vehicles, people have started switching over from petrol two wheelers to electric two wheelers. This trend will gain momentum with the launch of further higher power electric vehicles.
In fact, a much-needed Government support has already started coming in from a few environmentally conscious states like Rajasthan, Karnataka, West Bengal, Chhattisgarh, Madhya Pradesh, Pondicherry, Orissa, Andhra Pradesh, Chandigarh to name a few, in the form of RTO exemption / reduction, VAT reduction and subsidies to customers in order to promote electric / battery powered vehicles. A similar move by other Governments will go a long way in supporting this green vehicle."
35
M&M ARM BUYS ITALIAN TWO-WHEELER DESIGN CO MUMBAI: Mahindra & Mahindra’s (M&M) component arm Systech has acquired a controlling stake in Italian design firm Engines Engineering (EE) for an undisclosed amount. The Bologna-based firm, with annual revenues of about $12 million, develops motorcycle prototypes and two-wheeler designs. The acquisition further underscores reports that the Mahindras are interested in the growing two-wheeler market.
ET had recently reported that the Anand Mahindra-led company, that is a market leader in tractors and sports-utility vehicles, has been talking to Indian and overseas players to shape its two-wheeler plans. The company is reportedly keen on high-end Italian design companies MV Agusta and Cagiva, while also showing more than a passing interest in Kinetic Motors and China’s Lifan.
M&M through Systech has been looking at acquisition of reputed design houses. “Engines Engineering has been operative for the last three decades and a partnership with M&M will fuel growth,” said Engines Engineering chairman Alberto Strazzari. “I have great comfort level with M&M, having worked together with them for the last two years. We can combine our technological strengths, customer base and lower cost engineering excellence to fuel growth in Europe and India,” he added.
36
About 70% of the acquisition cost will be paid in cash and the selling shareholder Strazzari will continue to hold 30% and will combine his business with Mahindra Engineering Services. This indicates our model of partnering and leveraging on each other strengths, Mr Luthra said.
OVER 1000 TWO-WHEELER WORKSHOP CLOSED COIMBATORE: Over 1,500 two-wheeler workshops in and around the city downed their shutters, to "protest the opening" of 'Bike Zone,' by Multi-National Castrol, across the State.
According to K S Mani, president, Coimbatore Zone two wheeler Workshop workers union, the Castrol outlets, would directly hit hundred of small time workers, as the company was giving 'unnecessary concessions,' to lure the customers. The government should immediately intervene and stop mushrooming of such workshops, and protect small workshop owners, Mani said.
Castrol, which was opening 'bike zone', has now entered the 'four-wheeler garages' also, which would seriously affect the livelihood of hundreds of workers, the union said.
ICICI DISCONTINUES 2-WHEELER LOANS AT DEALER'S END
37
MUMBAI: ICICI Bank, the country’s largest two-wheeler financier, is discontinuing such loans offered at the dealer’s end from August 15. This model accounts for the bulk of the two-wheeler business for ICICI Bank. The bank has already transferred 200 employees in this unit to other departments.
ICICI Bank executive director V Vaidyanathan confirmed this to ET, “The bank has decided to reorient the two-wheeler business through branches rather than at dealerships,” he said. ICICI Bank has a network of around 1,400 branches.
The two-wheeler business in India has been facing a major upheaval, with many financiers exiting the market due to rising defaults and collection issues.
Incidentally, some of the newer players are also said to be cutting back on disbursements. The move will impact the two-wheeler business, which is already seeing a slowdown. Currently, ICICI Bank disburses around Rs 180 crore of two-wheeler loans every month.
Interest rates for two-wheelers are currently at around 24%. The average ticket size for these loans is quite small at around Rs 33,000, while the required income is Rs 5,000-15,000 a month. One out of four repayment cheques in two-wheeler loans bounces, but the backlash against the use of recovery agents has made repossession and recovery through agents difficult for lenders.
38
ITALIAN TWO-WHEELER DUCATI FORAYS INTO INDIA
NEW DELHI: Italian two-wheeler maker Ducati Motor Holding on Wednesday announced its foray into the Indian automobile market with the launch of five motorcycles, priced in the range of Rs 15 lakh to Rs 50 lakh.
"We will be launching four different models in multiple variants. These bikes will be available starting at Rs 15 lakh to Rs 50 lakh in the Indian market," said Ashish Chordia, Chief Executive Officer of Precision Motor India Pvt Ltd, sole distributor of Ducati bikes in India.
The company would import sixty units this year from its Italian manufacturing unit, he added.
BIKE PRICES SET TO ZOOM BY 2-3% MUMBAI: Bike makers seem to be a caught in a catch-22 situation since the past few months. Despite a bleak demand, bike prices are slated for a price mark-up for a second time this year. According to motorcycle majors, the hike this year in April was too small to counter the rapid rise in input costs. Prices are set to increase by 2-3% for the mid-range and premium bikes; the entry-level 100cc bike is priced at around Rs 35,000 and the premium bikes are at Rs 45,000 per unit.
39
After taking a price cut in March, bike makers were forced to increase prices in the range of Rs 500-1,000 in April 2008. Fierce competition had prevented the companies from hiking the prices of motorcycles in 2007. “The manufacturers have been absorbing the hike in the prices of steel, plastic and metal. Now, the industry is trying to protect its margins to maintain profitability. Discounts and incentives have also reduced,” said an auto analyst from a Mumbai-based brokerage.
“To absorb the increase in input costs, we are looking at a price hike, which is yet to be decided,” said Bajaj Auto GM (marketing) Amit Nandi. The major increase in input costs is coming from steel, which is up by Rs 13,000 per tonne, and plastics, which is up by Rs 1,800 per tonne.
BAJAJ AUTO, HERO HONDA WANT MORE CUT IN EXCISE DUTY
NEW DELHI: The Nano effect was too apparent to ignore at Finance Minister P Chidambaram's post-Budget conference on Monday with two-wheeler manufacturers, including Bajaj Auto and Hero Honda, demanding a further cut in excise duty for a level-playing field with small car makers.
The duty for two-wheelers and small cars has been brought down to 12 per cent in the Budget proposals, a move, two- wheeler manufacturers feel, would lead to unfair competition.
40
"Two-wheelers are used by real aam aadmi (common man)," Hero Honda Managing Director Pawan Munjal said at the conference while making a case for lower excise duty on two-wheelers.
The excise duty on two-wheelers and three-wheelers should be brought down to 8 per cent," Chairman of Bajaj Auto Rahul Bajaj said.
BAJAJ, HERO HONDA, KINETIC PLAN GAS-BASED 2-WHEELERS MUMBAI: After buses, cars and auto-rickshaws, two-wheeler manufacturers are looking at models that would run on gas. Fearing that the Nano would eat into their marketshare, two-wheeler manufacturers such as Bajaj, Hero Honda and Kinetic are considering launching models that can run on gas.
Energtek, an Israel-based company and world leader in absorbed natural gas (ANG) technology, has initiated discussions with Indian
two-wheelers manufacturers to supply the new technology. This company claims that ANG will reduce fuel cost by over 50% compared to petrol.
Bajaj Auto has decided to develop a dual-fuel two-wheeler which can run on gas and will also have the option of running on petrol, company sources said.
41
Honda, TVS, LML and Kinetic are also believed to be considering this.
Energytek has entered into a 50:50 joint venture with Nagpur-based LPG bottling company Confidence Petroleum to launch Confi Energtek Asia Ltd, a company that will market Energytek’s ANG technology in India and other Asian countries.
M&M ACQUIRE BUSINESS ASSETS OF KINETIC MOTOR
Mumbai: Mahindra & Mahindra Ltd. (M&M), one of India's leading automotive companies, today announced that its Board of Directors has approved the acquisition of business assets of Pune-based Kinetic Motor Company Ltd. (KMCL). The acquisition will be done through a New Company to be formed. (New Co). The consideration for the acquisition is a sum of Rs. 110 crores (subject to closing due diligence) plus 20 percent stake to KMCL in the New Co. M&M will hold the balance 80 per cent of the equity. The deal will enable Mahindra to design and market a range of scooters, value engineered motorcycles and high-end motorcycles for the Indian and global markets, helping it establish a robust, end-to-end two-wheeler business in every segment of the industry.
42
CAR SALES IN REVERSE GEAR, TWO-WHEELERS BACK IN BLACK NEW DELHI: It’s a reversal of fortunes in Motown. Car sales, which were clocking double-digit growth in August last year, have now turned negative while two-wheeler sales are back to showing strong positive growth this August compared to a negative drive last year.
The slump in car sales mainly came from rising inflation and interest rates coupled with high fuel prices which continued to dissuade customers from any fresh purchases. In contrast, the two-wheeler sector posted positive sales in August. Hero Honda Motors, the world’s largest two-wheeler manufacturer, saw its sales growing 27% to 3.05 lakh in August compared to 2.40 lakh last year. Country’s second-largest two-wheeler maker Bajaj Auto posted a 5% rise in its motorcycle sales in August at 1.75 lakh against 1.67 lakh in the same month last year. TVS Motors posted a 11.28% rise in sales.
HERO ELECTRIC TO FORAY INTO OVERSEAS MKT
CHANDIGARH: Bike maker Hero Electric has decided to foray into overseas market starting with exports of e-bikes to SAARC countries this year and also plans to set up a new Greenfield assembly unit.
"We have plans to export 4,000-5,000 units of bikes this year to SAARC countries to tap overseas markets," Hero Electric Managing Director Naveen
43
Munjal said here. Stating that the company would have exclusive dealers in the neighbouring countries for its exports project, he said, "Initially export will account for 15-16 per cent of total sales."
Recent happening on hero Honda
HERO HONDA OPENS MOTORCYCLE PLANT AT HARIDWAR
Haridwar – The country's largest two-wheeler maker Hero Honda Motors India will invest Rs. 150 crore to balance of its facility at Haridwar. Hero Honda has started operations at its new plant in Haridwar, Uttrakhand on Tuesday. The company has so far invested Rs. 450 crore in the plant.
The company has invested Rs 450 crore so far in the plant. The plant would have an initial installed capacity of half a million bikes annually and the company would increase it to one million units by 2008. A total investment of Rs 1,900 crore would be made in the project, which would have an overall production of 1.5 million units by 2010.
HERO HONDA PLANS RETAIL FINANCE BUSINESS
44
New Delhi: To maintain its leadership position in the decelerating two-wheeler industry, Hero Honda, the largest two-wheeler company in the world, plans to enter the retail finance market. According to sources in the automobile industry, it is looking for a joint-venture partner in the new business.
This comes at a time when many financial institutions, including GE Money, Centurion Bank of Punjab and Citibank, have exited the two-wheeler finance market. Others like the market leader ICICI Bank and HDFC Bank have reduced their financial exposure in the sector.
The two-wheeler industry has been hit hard by the prevailing high interest rates as well as the credit squeeze in the market. Hero Honda is looking at the non-banking finance company (NBFC) route to get into the retail finance market, on the lines of its rival two-wheeler companies — Bajaj Auto’s Bajaj Auto Finance and TVS Sundaram Finance of TVS Motors.
When contacted, the Hero Honda spokesperson said: “There is nothing concrete at this stage. We are looking at various possibilities to increase financing options for our products in the market.”
Two-wheeler sales have been hugely impacted by the high interest rates and non-availability of finance from banks. The industry sales through retail finance
45
has dropped to 60% from 75-80% a year back. Industry sales have declined 8% to 72.48 lakh units in the financial year 2008.
Hero Honda managed to buck the trend of decelerating sales and maintained flat sales in the same period. Its sales grew 0.23% to 32.46 lakh two-wheelers. Through its own finance company Hero Honda wants to rectify the liquidity crunch in the retail finance market thereby generating sales for its products.
HERO HONDA MARCH SALES RISE; BAJAJ, TVS MOTOR SEE FALL
Chennai, April 2 Hero Honda has reported 15 per cent increase in sales for March, despite continuing sluggish trend primarily due to higher cost of finance.
The company sold 3,20,594 units in March 2008 against 2,77,915 units in March 2007. In the full year 2007-08, the company sold 33,37,142 units against 33,36,756 in fiscal 2007. Till February the total sales witnessed a dip against previous year — it was March
46
that helped the company post at least a marginal increase in annual sales.
HERO HONDA SALES UP 9.54% IN MAY
Country's largest two wheeler maker Hero Honda Motors Ltd (HHML) today reported a 9.54 per cent rise in its motorcycle sale in May at 3,12,317 units compared to 2,85,109 units in the same month last year.
The company attributed this rise to its latest launch of new Splendor NXG and the 150cc executive segment bike Hunk.
"While Hunk has contributed largely to doubling our volume and share in the premium segment, the refreshed Splendor NXG has been driving the volumes in the deluxe segment," Hero Honda Motors Senior Vice President (Marketing & Sales) Anil Dua said in a statement.
HERO HONDA HIKES 100CC BIKE PRICES BY UP TO RS 850
NEW DELHI: Country's largest two-wheeler maker Hero Honda today increased the prices of its 100cc bikes by up to Rs 850 on account of rising input costs.
"In view of consistently rising input costs, we have raised the prices of our product range to partially offset this increase, for example
47
in 100cc range, the price increase is limited to Rs 850," the company said in a statement.
The company, however, maintained the price hike has been restricted only to its 100cc bikes as of now.
HERO HONDA AUG SALES UP 27 PC
NEW DELHI: Country's largest two-wheeler maker Hero Honda today reported a 26.84 per cent jump in its domestic sales in August at 3,05,516 units, against 2,40,875 units in the corresponding month last year.
The cumulative sales for the April-August period this year stood at 14,81,077 units, compared with 12,44,919 units in the corresponding period last year, reflecting a 18.97 per cent growth, the company said in a statement.
The company said it has strengthened its share in the domestic motorcycle market by over 55 per cent.
"Our strategy is yielding results... however, the industry continues to face uncertainty on account of high interest rates and overall credit squeeze," Hero Honda Motors Senior Vice President (Marketing and Sales)
HERO HONDA IN-HOUSE TEAM TO STUDY CAPACITY CUTS
Haridwar: Top two-wheeler maker Hero Honda Motor Ltd said that it has set up an in-house team that
48
would look into whether the company needs to cut capacity at any of its existing plants vis-a-vis its future requirements. This, even as the company announced investments of an additional Rs 150 crore in the current fiscal to scale up capacity at its facility here, which was inaugurated on Tuesday. A sum of Rs 450 crore had been invested earlier in the plant.
“We have undertaken project Samadhan within the company that will come out with a solution for utilisation of full capacity. Right now we want to maximise production at the Haridwar plant to gain from the excise duty benefits,” said Mr Pawan Munjal, Managing Director and CEO, Hero Honda. The move would help the company counter the enormous pressure being created by increasing input prices.
However, he declined to comment on whether that would mean having to cut production at its other two facilities in Dharuhera and Manesar. Mr Munjal was talking in context of the company’s ability to utilise the capacity of its three plants at a time when the two-wheeler industry has been seeing a declining trend.
NEW DELHI: Fullerton India Credit Co Ltd, one of the fastest-growing NBFCs, on Tuesday signed an MoU with Hero Honda Motors Ltd to offer consumer finance for buying two-wheelers at Honda dealerships.
49
"Our understanding of the small credit market in India and our international experience in the mass market segment will be beneficial in servicing the wide spread network of Hero Honda Motors. We see a lot of synergies in this tie-up. Hero Honda India’s leading brand of two-wheelers targets customers in the same mass market as we do in urban, semi-urban and rural areas," said G S Sundararajan, managing director & CEO, Fullerton India Credit Company Ltd.
"Our tie-up with Fullerton India is timely as we are expanding our reach to newer markets in smaller towns, besides consolidating our positions in the traditional markets. Fullerton India is a unique financial partner with its focus only on the mass market segments in urban and semi-urban areas. It is primarily engaged in providing loans to the salaried and self-employed. It already enjoys a good equity with the customer base and has an enviable network of 800 branches across 380 centres. We hope their direct presence in each of our dealer locations will greatly enhance customer service, making it easy for our customers to buy our products. This will further strengthen our dealerships and help us garner a greater market share," said Ravi Sud, chief financial officer, Hero Honda Motors Ltd.
The tie-up will enable Fullerton India to offer Hero Honda customers access to its financial services at Hero Honda’s extensive dealer network. Through this MoU, Fullerton India will set up its counter in each
50
Hero Honda dealership to offer finance to Hero Honda customers. This will be like an extension counter of the local branch of Fullerton India.
HERO HONDA NOT TO RAISE BIKE PRICES IN '08
NEW DELHI: Hero Honda Motors has decided not to increase the prices of two-wheelers till the end of this year.
"We will not increase the prices of our vehicles till the end of this year," Hero Honda Motors Chairman Brijmohan Lall Munjal told reporters on the sidelines of an auto industry event here today.
Asked if the rising cost of raw materials will put pressure on the profit-margin of the company, he said, "I don't think so. We will have to tighten our belts."
HERO HONDA VIE FOR STAKE IN UCO BANK ARM
MUMBAI: Hero Honda are in talks with UCO Bank for acquiring a 25% stake in the proposed financial services subsidiary of the bank. While the state-owned UCO Bank will hold 49% in the entity, it has short-listed four foreign firms for the remaining 26%. This is likely to be a top UK-based investment firm, said a person familiar with the development.
HERO HONDA'S DHARUHERA PLANT CLOSED AS WORKERS STIRKE WORK3 MAY, 2008, 1658 HRS IST, PTI
51
NEW DELHI: Country's largest two-wheeler maker Hero Honda Motor has been hit by workers' strike forcing the closure of its manufacturing unit at Dharuhera in Haryana.
Sources said work at the Dharuhera factory stopped since Saturday morning and all the workers are staging protest inside the plant.
The strike broke out after the management discontinued services of about 50 contract workers, the sources said, adding the workers had also opposed to being shifted from one production line to another.
The number of contract workers removed by the company could not be ascertained as Hero Honda officials were not available for comments.
The sources said workers have been opposing the company's move to shift a bulk of production to its newly opened third plant at Haridwar, where Hero Honda plans to produce its high volume models, including Splendor and Passion.
The contract and casual workers feared losing their jobs after the planned shift in production to Uttarakhand. They have been joined by the regular workers in the strike.
Hero Honda manufactures Splendor Plus and CD Deluxe models from the plant, which has a total of
52
about 6,500 workers. The plant has a production capacity of about 5,000 units per day.
HERO HONDA'S DHARUHERA PLANT RESUMES WORK5 May, 2008, 1800 hrs IST, PTI NEW DELHI: Country's largest two-wheeler maker Hero Honda on Monday said it has resumed work in its Dharuhera unit in Haryana following an agreement with the striking workers.
On May 3, the unit was hit by workers' strike forcing closure of the plant.
"Normalcy has been restored at our Dharuhera plant following a mutually amicable resolution of certain concerns raised by some contract labourers due to instigation by external elements," the company said in a statement.
They have agreed to resume work so that the flexibility of operations within the plant is ensured, it added.
"It has been explained to them that this exercise would not adversely impact their work and wages. As always, Hero Honda gives utmost priority to the welfare of its workers and will continue to carry on a
53
dialogue with them towards that objective," the company statement said.
Earlier after the strike broke out in the plant last week, Hero Honda said as a part of routine practice the company had moved some contract labourers from one area to another within the Dharuhera plant keeping in view the flexibility of operations.
The workers had also opposed to the company's move to shift a bulk of production to its newly opened third plant at Haridwar, where Hero Honda plans to produce its high volume models, including Splendor and Passion.
The contract and casual workers feared losing their job after the planned shift in production to Uttarakhand. They were joined by the regular workers in the strike.
HERO HONDA TO FOCUS ON RURAL INDIA NEW DELHI: Hero Honda has worked out a major expansion strategy for the rural markets and is planning to strengthen retail financing to support the initiative, that could lead to setting up of its own finance arm.
Pawan Munjal, MD of Hero Honda, told TOI that rural market would be a special focus area for the company as it is looking at new growth areas to maintain sales momentum in a shrinking market “We have created a special ‘rural vertical ’ to push growth
54
and this would spearhead our expansion in the rural market,” Munjal said.
Two-wheeler penetration in rural belts is still very low with data shows that less than 10% of households own a two-wheeler . “So there is a large market to be tapped. The objective is to reach out to as many potential customers as possible ,” he said.
As part of its strategy, Hero Honda is mapping the demographic landscape to formulate region-specific modules to tap customers at a very local level. “For example , distinct strategies are being evolved to leverage regional festivals such as Pongal and Onam in the south, Gudi Padwa in Maharashtra, Durga Puja in the eastern region , Dhanteras and Diwali in the north,” Munjal said.
The company is also reaching out to ‘opinion leaders’ . Village haats and mandis are also being targeted to reach customers. “We already have a strong presence in the rural markets. We have had several initiatives and now we have created a dedicated ‘rural
vertical’ , with which we are consolidating all these initiatives and looking ahead,” Anil Dua, senior V-P said.
Munjal added that the company is tying up with new partners, including local cooperative banks and financing units to have a robust financial model.
55
Setting up of an independent retail financing arm is an option, though Munjal said, no final decision has been taken. “If necessary, we can do it. It is something we have to look at closely. Hero Honda already has a company ‘Hero Honda Finlease’. This is currently not in consumer finance and we might even look at this if the need be,” he said.
The company is also expanding its distribution network to support the rural initiative. It has grown its network by over 50% over the last two years from 2,000-3,000 ‘touch points’, that include authorised dealerships, service and spare parts outlets, and dealer-appointed outlets across the country. This would be further expanded to 3,500 this year.
KEY FACTORS INFLUENCING DEMAND OF TWO-WHEELER
The demand for two-wheelers has been influenced by a number of factors over the past five years. The key demand drivers for the growth of the two-wheeler industry are as follows:
▪ inadequate public transportation system, especially in the semi-urban and rural areas;▪ Increased availability of cheap consumer financing in the past 3-4 years;▪ Increasing availability of fuel-efficient and low-maintenance models;▪ Increasing urbanization, which creates a need for personal transportation;
▪ Changes in the demographic profile;
56
▪ Difference between two-wheeler and passenger car prices, which makes two-wheelers the entry level vehicle;▪ Steady increase in per capita income over the past five years; and▪ Increasing number of models with different features to satisfy diverse consumer needs.
KEY FACTORS AFFECTING THE SALES OF MOTORCYCLES:
Government policy impact on petrol prices : petrol prices determine the running cost of two wheelers expressed in rupees per kilometer. Petrol prices are the highest in India as GOI subsidizes kerosene and diesel.
Improvement in disposable income: With the increase in salary levels due to entry of multinationals following liberalization process the disposable income has improved exponentially over the years. This will have a multiplier effect on demand for consumer durables including two wheelers. This is already witnessed in improved demand two wheelers.
Implementation of mass transport system: many states have planned to implement mass transport systems in state capitals in the future. This will have a negative impact on demand for two wheelers in the long run. But taking into account the delays involved in the implementation of such large infrastructure projects, we expect the demand to be affected only five to seven years down the line.
57
Availability of credit for vehicle purchase: The availability and cost of finance affects the demand for two wheelers as the trend for increased credit purchases for consumer durables have increased over the past few years.
CONCLUSIONThe feeling of freedom and being one with the Nature comes only from riding a two wheeler. Indians prefer the two wheelers because of their small manageable size, low maintenance, pricing and easy loan repayments. Indian streets are full of people of all age groups riding a two wheeler. Motorized two wheelers are seen as a symbol of status by the populace. Thus, in India, we would see swanky four wheels jostling with our ever reliable and sturdy steed: the two wheeler.
Since the first car rolled out on the streets of Mumbai (then Bombay) in 1898, the Automobile Industry of India has come a long way.
India is the second largest producer and manufacturer of two-wheelers in the world. Indian two-wheeler industry has got spectacular growth in the last few years.
In India there are 7 scooter manufacturers, 9 motorcycle manufacturers, 3 moped manufacturers. Bajaj Auto, Hero Honda, TVS, etc are the leading manufacturers.
58
HEROHONDA has been the world's biggest manufacturer of 2-wheeled motorized vehicles since 2001, when it produced 1.3 million motorbikes in a single year.
Hero Honda's Splendor is the world's largest selling motorcycle. Today Hero Honda has an assembly line of nine different models of motorcycles available. It holds the record for most popular bike in the world by sales for Its Splendor model.
Bibliography
WEBSITE:
WWW.HEROHONDA.COM WWW.HEROCYCLES.COM WWW.WEKIPEDIA.COM WWW.TIMESOFINDIA.COM HTTP://WWW.THEHINDUBUSINESSLINE.COM
HTTP://ECONOMICTIMES.INDIATIMES.COM/SEARCH.CMS
WWW.INDIAINFOLINE.COM
HTTP://WWW.FADAWEB.COM/ INDIANTYRESINDUSTRY.HTM
BOOKS:
AUTOCARE OVERDRIVE INDIAAUTO
59
60
